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The appraiser's perspective: After the sub-prime meltdown

Jul 30, 2007

Embracing change can bring success: New tools for the slowing mortgage marketSteve Grant and Allen JohnsonMortgage lead software There's an old saying that the only constant is change. Nowhere has this been more true than in the mortgage industry. Just a few years ago, interest rates were at a low and everyone in the industry was benefiting from a steady stream of new home purchases and refinances. Then rates began to rise, origination volume declined and competition became fierce. Faced with falling revenues, many mortgage companies went out of business. Today, the mortgage professionals who are surviving—and thriving—in the current market conditions are those who recognize the need to adapt to the continually changing market, nurture existing customers and employ new strategies to generate business. More often than not, loan officers are now turning to specialized technologies, such as lead generation programs and tools that improve consumer credit scores, to help them close more loans. Lead generation programs deliver customers Many mortgage professionals who are looking to maintain or grow their business and market share take advantage of lead generation programs to develop lists of qualified loan prospects that need, or want, a mortgage loan. The best of these programs allow loan officers to set specific parameters for their target population, such as credit score, income and/or debt level, property location and type, number of children, living area and more. A good lead generation program will work from the most current data available so that the leads loan officers receive are very fresh. Most lead generation programs offer a secure, easy-to-use Web site where brokers and lenders are able to pinpoint consumers who match a preferred risk level and who are more likely to qualify for a mortgage. Because prescreened leads are more likely to result in a closing, loan professionals find their efforts are generally more rewarding and they spend far less time chasing unqualified prospects. Raising borrowers credit scores increases closings As every loan officer knows, credit scoring can make or break a loan application. Because low or nonexistent credit scores are the reason many loan applications are rejected, raising the score even a few points is often all it takes to enable the applicant to become a homeowner. It can also mean the difference between getting a prime and sub-prime loan. Today, new scoring methods and new means of assessing a consumer's ability to make regular loan payments are helping applicants across the country qualify for homeownership. • Score optimizing tools can be extremely useful in helping borrowers reach their target credit score. In fact, when such tools are used, nearly 90 percent of all applicants jump score bands. • Pay Rent Build Credit (PRBC) is a relatively new means of determining an applicant's ability to make house payments. This program is designed to help potential borrowers who have always paid their bills on time, but who don't have enough of a credit history on file at any of the national credit bureaus to allow them to qualify for a loan. Data and payment history on rent, mortgage, utility, phone, insurance, childcare and other recurring payments that are not commonly reported to the big three credit bureaus are used by PRBC to produce a bill paying score. This score can be used on a stand-alone basis as a non-traditional mortgage credit report, or in conjunction with a traditional credit report to help the borrower qualify for a mortgage. On the PRBC Web site, consumers can enroll in the program and create a credit file where they can enter their bill payment history and order a trade line verification. With proper documentation, most verifications are performed within two business days. PRBC reports are then generated and delivered electronically. For many prospective homeowners, such as recent high school or college grads, immigrants and applicants who are widowed or divorced, PRBC provides a new means of qualifying for a loan. PRBC reports are accepted by Fannie Mae, Freddie Mac, FHS, MGIC and top lenders nationwide. The winds of change bring opportunity As the mortgage industry continues to shift and change with interest rates, mortgage professionals who want to succeed will have to change with it. Now is the time to try new prospecting methods, to work harder to qualify the prospects at hand and to investigate different pathways to success. Those who embrace the change will discover there is still plenty of business to be found. Steve Grant is president and Allen Johnson is vice president of sales and marketing of Credit Plus Inc., a credit information services company. They can be reached at (800) 258-3488 or e-mail [email protected].
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